joint announcement by berjaya corporation berhad ... - Bursa Malaysia

JOINT ANNOUNCEMENT BY BERJAYA CORPORATION BERHAD AND BERJAYA SPORTS TOTO BERHAD

AWARD OF INVESTMENT REGISTRATION CERTIFICATE FOR THE NATIONWIDE COMPUTERIZED LOTTERY IN VIETNAM

1.0

INTRODUCTION Further to the announcement dated 12 May 2014, the Board of Directors of Berjaya Corporation Berhad (“BCorp”) and Berjaya Sports Toto Berhad (“BToto”) are pleased to announce that the Investment Registration Certificate was issued on 20 January 2016 to BCorp and Vietnam Computerized Lottery One Member Limited Liability Company (“Vietlott”), from the Hanoi Department of Planning and Investment (“Certificate”) pursuant to the Business Cooperation Contract (“BCC”), certifying that they have been awarded an exclusive 18-year contract to invest in and operate a nationwide computerized lottery in Vietnam (“Project”). The Project will be carried out by the indirect subsidiary of BCorp namely Berjaya Gia Thinh Investment Technology Joint Stock Company (“Berjaya GTI”). Berjaya GTI is a Vietnamese company which is 51%-owned by Berjaya Lottery Vietnam Limited (“BLV”), a company incorporated in Labuan, which in turn is 80%-owned by BCorp and 20% owned by BToto.

2.0

BRIEF DETAILS ON THE PROJECT

2.1

The Project was the culmination of a competitive bidding process with 5 other international lottery operators submitting proposals pursuant to a Request for Proposal issued by Vietlott. The BCC, entered into between BCorp and Vietlott comprises investment for procurement and operation of the technical system, equipment, technology, software and computerized lottery in Vietnam. The tenure of the BCC is 18 years commencing 6 months from the issuance date of the Certificate. The Project will be implemented in the entire territory of Vietnam and is regulated by the regulatory agency tasked with the function of state supervision of lottery business in Vietnam. Subject to the approval of the said regulatory agency, the products to be launched pursuant to the Project shall include Lotto Games, Digit Games and Fast Draw Games which will be distributed through various channels such as computerized terminals, telephones and mobile phones and the internet. Barring any unforeseen circumstances, Berjaya GTI expects to launch its first game, a Lotto Jackpot game by mid-2016, followed by a Digit game thereafter. Initially, the Project will be launched in Ho Chi Minh City and will be rolled out progressively to reach nationwide coverage in Vietnam within the next five (5) years with some 10,000 terminals.

2.2

BCorp and Vietlott are exclusive partners in the implementation of the Project and both parties have agreed not to invest, participate in, directly or indirectly in any other project to conduct computerized lottery business in Vietnam.

2.3

The estimated cost of the Project is about USD210.58 million (equivalent to about RM919.18 million) to be incurred over a period of 18 years.

1

3.0

INFORMATION ON VIETLOTT Vietlott is a 100% state owned enterprise, incorporated in accordance with Decision No. 2933/QD-BTC dated 5 December 2011 of the Minister of Finance of Vietnam. It has been chartered to conduct business in self-select computerized lottery and other bonus-based entertainment games in accordance with the Laws of Vietnam. At present, Vietlott is the only enterprise permitted to conduct business in computerized lottery in the entire territory of Vietnam.

4.0

SOURCE OF FUNDING The investment required for the Project will be funded through internally-generated funds and/or borrowings over the tenure of the Project.

5.0

RATIONALE FOR THE INVESTMENT IN THE PROJECT BCorp via BToto is already an established local industry leader in the numbers forecast gaming industry in Malaysia as well as in the Philippines. The Project represents an opportunity for the BCorp Group to further venture into the gaming industry.

6.0

PROSPECTS

6.1

Overview of the Vietnam Economy Vietnam aims to lift its growth rate over the next five years to an annual average of 6.5%-7% by capitalising on multilateral trade deals, modernising agriculture and boosting investments, its communist party said on Tuesday. The ruling party, which rarely details its economic strategy, is set for a shakeup in January 2016 after a five-yearly congress that will decide who leads a low-cost manufacturing hub with high-tech ambitions. It will aim to maintain macro-economic stability and push for industrialisation while modernising agriculture and raising competitiveness, the party said in a draft political report ahead of the congress. "The reform of the growth model is being shifted strongly from focusing on exports and investment capital to the development of investment capital, exports and the domestic market," the report said. The country will aim to "restructure and deal effectively with bad debts", which have been lower but still at a high ratio, it said. Vietnam's USD186 billion economy is one of only a few bright spots in South-East Asia, posting growth of 6.28% in the first half of this year, the fastest since 2008. It has embarked on liberal reforms to strengthen capital markets and position itself as a low-cost manufacturing alternative to China, especially for cell phones, TVs, footwear and garments. The economy expanded 5.82% a year in 2011-2015 with an average annual growth in 20062010 was 7% per annum. (Source: Business News, The Star Online, Tuesday, 15 September 2015)

2

6.2

Prospects of the Project BCorp believes that the high barriers to entry, its 18 year exclusive contract and low competitive pressure in the lottery business will provide a stable business environment for the Project to sustain and achieve growth in Vietnam. BCorp, via BToto with its thirty (30) years’ experience in the gaming industry stands is well positioned to establish a notable presence in the Vietnamese gaming industry. With the large population of about 90 million in Vietnam and gross domestic product that grew by 6.5% in 2015, the interest and demand for lottery gaming in Vietnam is expected to be significant with its vibrant economic environment. The Project will facilitate the BCorp Group’s objective of expanding its gaming business overseas. This will also enable the BCorp Group to strengthen and widen its core business network and also explore other businesses with growth potential in Vietnam.

7.0

RISK FACTORS The risks in relation to the Project include changes in general economic conditions such as, but not limited to, inflation, taxation, interest rates, changes in business and credit conditions and other operational risks which may occur during the course of business in Vietnam. However, the BCorp Group is already involved in the gaming industry in Malaysia and the Philippines, and has significant investments in property development and the hotel and stock broking industry in Vietnam since year 2005. Hence, it is expected that the abovementioned risks can be mitigated through BCorp Group’s extensive experience in the gaming industry and its presence in the Vietnamese market.

8.0

EFFECTS OF THE PROJECT The Project will not have any effect on the issued share capital, major shareholders’ shareholdings and shareholding structure of BCorp and BToto. The Project is not expected to have any material effect on the consolidated net assets and consolidated earnings of BCorp and BToto for the current financial year ending 30 April 2016. However, it is expected to enhance the earnings of the BCorp Group and the BToto Group in the future.

9.0

MAJOR SHAREHOLDERS’ AND DIRECTORS’ INTERESTS BToto is a subsidiary of Berjaya Land Berhad which in turn is a subsidiary of BCorp. BCorp will undertake the Project via Berjaya GTI which is a 51% subsidiary company of BLV. BToto also has a 20% equity interest in BLV. None of the Directors and major shareholders of BCorp and BToto including persons connected to them has any interest, directly or indirectly, in the Project.

10.0

HIGHEST PERCENTAGE RATIO APPLICABLE The highest percentage ratio applicable pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) based on the last audited consolidated financial statements of BCorp for the financial year ended 30 April 2015 is approximately 8.19%.

3

11.0

DIRECTORS’ RECOMMENDATION Having considered all aspects of the Project and after careful deliberation, the Boards of Directors of BCorp and BToto are of the opinion that the Project is in the best interest of the BCorp Group and the BToto Group.

12.0

DOCUMENTS AVAILABLE FOR INSPECTION The Certificate and the BCC are available for inspection at the Registered Office of BCorp at Lot 13-01A, Level 13 (East Wing), Berjaya Times Square, No. 1 Jalan Imbi, 55100 Kuala Lumpur during normal office hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this Announcement.

This Announcement is dated 20 January 2016.

4